How to Fund Retirement: 11 Tips for People Close to or at Retirement Age

Thirty percent of baby boomers 55 years and older have nothing saved for their retirement, according to a recent survey. Almost another 30 percent of those same boomers who indicated they had some money saved admitted that their retirement savings didn’t even come close to $50,000. With recommendations citing a million dollars or more as an ideal retirement nest egg, many Americans need to find other ways to fund their retirement living.

If you’re like most people in the survey, you wish you had saved more money earlier in life. Even those with significant savings often wish they had more. But retirement can sneak up on you, and before you know it, it’s here. Now you need to make the best decisions possible moving forward as you decide how to fund your retirement. If you’re nearing retirement and find yourself without enough savings, continue reading to learn how to fund retirement beginning today.

11 Tips to Fund Your Retirement

It’s never too late to think about financial planning after retirement. Of course, the options available to you narrow as you near or pass retirement age, and you may not be able to save as much as you would like. However, every little bit helps.

1. Evaluate Your Situation and Set Realistic Goals

As you dust off your retirement planning and begin to look at retirement investment options available to you, set a retirement savings target. How much money do you need to retire — how much is enough? Consider also, how much money can you realistically save for your retirement?

You can evaluate where you are and set goals by looking at your current investments and savings. You should also consider:

  • Your lifestyle and expenses
  • Your pension plans
  • Your retirement plans or IRAs
  • Social Security
  • Potential medical bills you have or anticipate incurring

With this information, try to determine how much retirement funds you need. A retirement calculator can be helpful.

2. Reduce Your Debt

Lingering debt can make it difficult to save. Money used to pay off the principal of your debt is money that’s working for your past, not your future. Interest paid on debt is money that can better serve you if used to increase a retirement fund, instead of paying for money already spent months or years ago. If you have lingering debt, it’s time to make a concerted effort to eliminate it.

One way to work towards paying off debt is to negotiate a lower interest rate with your lenders. Call and ask. Many will work with you to keep your business, and if they won’t, move the debt to a lower-interest card. As you work to pay down debt, tackle your highest-interest-rate debt first to make the biggest impact.

Other ways you can pay down your debt faster include increasing your monthly payments, consolidating debt or developing a repayment plan with the help of a professional advisor or your creditor.

3. View Retirement Differently

There’s no hard and fast rule that you have to quit working just because you’ve reached the age of retirement. You can still continue to work full- or part-time as long as your health and physical well-being allow.

Continuing to work gives your nest egg a little more time to catch up. It keeps you active, prevents social isolation and continues to remind you that you’re still a vital member of the community. If you decide to work, you won’t be alone. A study found that almost 50 percent of baby boomers want to continue working during retirement and 72 percent of incoming boomers plan to do the same.

4. Plan for Healthcare Costs

Large medical bills, which often become more prevalent with age, can quickly empty even a robust a savings account. It’s important to prepare for both expected and unexpected medical costs as part of retirement planning. According to a 2019 Fidelity Investments estimate, a mid-60s aged couple will need $285,000 to cover the healthcare costs they’re likely to incur during retirement. Additionally, Genworth’s Cost of Care survey indicates the cost of semi-private accommodations in a nursing home averages $90,000 annually. Good retirement planning will determine how to manage these costs.

One way to manage healthcare costs is by having a long-term care health insurance policy. Long-term care insurance can not only help pay for healthcare costs, it often partially or fully covers supportive living communities, such as a continuing care retirement community that will help you live well from independent living to skilled nursing.

5. Make the Most of Social Security

Most people begin collecting Social Security too early, which can affect how much it helps your retirement funding. Waiting to collect Social Security until the age of 70 instead of 66 increases your monthly benefit by 32 percent.

There are other benefits for married couples. The biggest advantage is gained by having the spouse who makes the highest salary continue working. Not only are they generating more money for their retirement, when one of them passes away, the surviving spouse continues to collect the larger Social Security benefit.

You should also consider your tax situation and how receiving a Social Security benefit will impact it before deciding the best time to take Social Security.

6. Create Side Incomes Beyond Investing

Investments are often a key source of retirement funding, but more and more people are finding ways to generate side incomes such as freelancing or serving as a consultant in order to generate income into retirement. In fact, a 2018 Bankrate survey determined that 37 percent of Americans work in a side job.

Aside from continuing to work at your current job after working for retirement, a freelance or consulting position can help you generate income while providing more flexibility. You may also want to consider passive income, such as that generated by real estate.

7. Make Catch-Up Contributions

Workers aged 50 and over are allowed to take advantage of catch-up contributions for qualified retirement accounts. For example, in 2020 the standard IRA contribution limit is $6,000 while the catch-up limit is $7,000.

If you take advantage of these contributions, you may have to pay an early withdrawal penalty if you tap into them earlier than 59-1/2 years of age.

8. Consider a Reverse Mortgage

If your home is paid off or you have a substantial amount of equity, you might want to consider a reverse mortgage. A reverse mortgage gives you access to the value of your property, allowing you to draw on your home’s equity to receive a one-time cash payment, deferring payments to when you move out of the home or pass away.

Retirees may use those funds to make retirement investments. Since it’s a “nonrecourse” loan, even if your home sells for a lesser amount later, you (the seller) aren’t responsible for the difference. Your age and the value of your home will determine how much you can qualify for.

9. Consider a Life Settlement

A life settlement — the sale of a life insurance policy to a third party for a one-time cash payment that is worth more than its cash surrender value but less than its net death benefit — is another way to come up with additional cash for those who have a life insurance policy. The party who purchases the policy becomes the beneficiary and takes up the payments.

A life settlement may be a good option if you have multiple life insurance policies or no longer have a need to support someone after your death. You may want to talk with a financial advisor or insurance professional before making a final decision.

10. Consider Downsizing

Downsizing is another great way to save money. By selling your larger home and moving into a smaller one, you’ll have access to monies you can use to invest in your retirement.

Depending on where you move to, downsizing may also help you cut down on maintenance and repair bills in the long term. For example, independent living communities take care of upgrades, maintenance and repairs so you don’t have unexpected expenses like replacing the refrigerator or repairing your roof.

11. Consider Financial Assistance

Depending on where you live, there may be financial assistance available to help with your retirement. For example, in Georgia there are two Medicaid waivers that may help individuals who need skilled nursing remain at home or in an assisted living community. You can learn more about the Georgia Community Care Services Program (CCSP) waiver here, while you can find information on the Georgia SOURCE Medicaid Waiver Program here.

If you need higher levels of medical care, there may also be programs in your state that help lower the cost of care. In Georgia, you can consider both GeorgiaCare, which helps with prescription drugs, and LIHEAP, which helps low-income residents with heating and cooling bills.

If you live in a different state, do some research on financial assistance programs, or speak with a government or financial professional to explore your assistance options.

Use Multiple Methods to Fund Your Retirement

Regardless of how much or how little you have saved for retirement now, the most sustainable strategy is typically one that’s diversified. Include multiple funding methods in your plan, such as retirement savings, passive income streams, downsizing and maximizing your social security. The combination of funding methods will help improve your position.

As you plan for retirement, you should also consider your living arrangements and their cost. Are you downsizing? Where to? Supportive living communities or full-service retirement communities like The Lodge may be a good choice. Our services and amenities create the ultimate senior living lifestyle. Contact us to learn more.